Obama: "[B]y The Time I Took Office, We Once Again Found Ourselves Deeply In Debt"
In Budget Speech, Obama Stated: "Democrats And Republicans Committed To Fiscal Discipline During The 1990s, We Lost Our Way In The Decade That Followed." From Obama's April 13 speech on the budget:
To meet this challenge, our leaders came together three times during the 1990s to reduce our nation's deficit -- three times. They forged historic agreements that required tough decisions made by the first President Bush, then made by President Clinton, by Democratic Congresses and by a Republican Congress. All three agreements asked for shared responsibility and shared sacrifice. But they largely protected the middle class; they largely protected our commitment to seniors; they protected our key investments in our future.
As a result of these bipartisan efforts, America's finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt free, and we were prepared for the retirement of the Baby Boomers.
But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program -- but we didn't pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts -- tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.
To give you an idea of how much damage this caused to our nation's checkbook, consider this: In the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.
But that's not what happened. And so, by the time I took office, we once again found ourselves deeply in debt and unprepared for a Baby Boom retirement that is now starting to take place. When I took office, our projected deficit, annually, was more than $1 trillion. On top of that, we faced a terrible financial crisis and a recession that, like most recessions, led us to temporarily borrow even more.
In this case, we took a series of emergency steps that saved millions of jobs, kept credit flowing, and provided working families extra money in their pocket. It was absolutely the right thing to do, but these steps were expensive, and added to our deficits in the short term.
So that's how our fiscal challenge was created. That's how we got here. And now that our economic recovery is gaining strength, Democrats and Republicans must come together and restore the fiscal responsibility that served us so well in the 1990s. We have to live within our means. We have to reduce our deficit, and we have to get back on a path that will allow us to pay down our debt. And we have to do it in a way that protects the recovery, protects the investments we need to grow, create jobs, and helps us win the future. [Remarks by the President on Fiscal Policy,
4/13/11]
Right-Wing Media Respond By Complaining That Obama "Blame[d] Bush" In Budget Speech
Kilmeade: Obama's Speech Was "Blame Bush." On the April 14 edition of Fox News' Fox & Friends, co-host Brian Kilmeade claimed that the theme of Obama's budget speech amounted to "blame Bush." Guest co-host Peter Johnson Jr. responded by saying, "All the way. Very perceptive, Brian." Kilmeade then stated, "How could you possibly, three years into your presidency, blame what happened eight years ago or along the way?" From Fox & Friends:
GRETCHEN CARLSON (co-host): And even people on [Obama's] own debt commission, Republican and Democrat -- you have Alan Simpson, a former senator from Wyoming, and Erskine Bowles, the Democrat who is the co-chair -- apparently they were sitting in the front row of this speech. Now, according to one account, Erskine Bowles would not even turn around to talk to reporters after this speech. And, apparently, Alan Simpson said to a reporter, pray for the gang of six -- those are the three Democrats and the three Republicans who are trying to come together to hammer out their own plan with regard to the debt, and he says pray for them.
KILMEADE: What do you mean by that? What do you think he meant?
CARLSON: I'll let the viewers decide what Alan Simpson says about that.
JOHNSON: Well, he was scoffing at the notion that somehow it was a plan. There had been all this build-up that this was going to be a plan by the president to counter what the Republican Party had been talking about in terms of cutting the deficit, and then we had a 44-minute speech.
KILMEADE: Which was blame Bush.
JOHNSON: All the way. Very perceptive, Brian.
KILMEADE: How could you possibly, three years into your presidency, blame what happened eight years ago or along the way. And plus there's a problem with that argument, which we'll debate later in the show. [Fox News, Fox & Friends, 4/14/11]
Kilmeade: "The Thing That I Was Most Stunned About Is The Way He Brought Up, Without Saying The Name, President Bush." Later on Fox & Friends, Kilmeade stated, "The thing that I was most stunned about is the way he brought up, without saying the name, President Bush." He continued:
KILMEADE: The thing that I was most stunned about is the way he brought up, without saying the name, President Bush. He said, we used to be on the right fiscal path in the 90s, and we would have been fine today if it wasn't for the last 10 years where we got off track and we ran up huge deficits. Because he claims these tax cuts - you know, the tax cuts where 1 percent of this country pay almost 40 percent of the total tax burden. They're already shouldering it. Let alone the state tax that comes in. But yet the president seems to be couching it as the fortunate people, who, of course, come from royalty and don't earn money -- they just have it. Those fortunate people - those are the ones that got to give more. Then everyone will be OK. [Fox News, Fox & Friends, 4/14/11]
Carlson: "Obama Back To The Bush Blame Game When It Comes To The Deficit." Later on Fox & Friends, Carlson teased an upcoming segment by stating: "And as we told you, President Obama back to the bush Blame game when it comes to the deficit. But now that he's holding the checkbook, does that argument really work?" While Carlson spoke, on-screen text stated, "Bush blame game":
[Fox News, Fox & Friends, 4/14/11]
Kilmeade: "President Obama Is Still Playing The Bush Blame Game." Introducing a segment on Obama's speech, Kilmeade stated:
KILMEADE: Well, the national debt has increased by $3.65 trillion since President Obama has taken office. But despite that fact, the deficit is now more than $14 trillion, President Obama is still playing the Bush blame game. [Fox News, Fox & Friends, 4/14/11]
Doug Powers: Obama's "Obligatory Bush Blame" Was "Predictable." In an April 13 post on Michelle Malkin's blog, Dough Powers wrote that "[t]he 'predictable as the sun rising in the east' part was, of course, the obligatory Bush blame." From Powers' post:
The "predictable as the sun rising in the east" part was, of course, the obligatory Bush blame:
To give you an idea of how much damage this caused to our national checkbook, consider this: in the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years. [MichelleMalkin.com,
4/13/11]
Jim Geraghty: "There Is A Lot Of Blaming Bush In This Speech." From an April 13 National Review Online post by Jim Geraghty:
There is a lot of blaming Bush in this speech. Quick perspective: Using numbers from the U.S. Treasury, we see that the debt during Bush's eight years in office increased from $5.7 trillion to $10.6 trillion, or $4.9 trillion over eight years. That's bad; that's basically $610 billion per year. But in the less than three years Obama has been in office, the debt has increased from $10.6 trillion to $14.2 trillion, a $3.6 trillion increase in about 27 months. In other words, Obama is increasing the debt by $1.6 trillion per year, three times as fast as Bush. [National Review Online,
4/13/11]
In Fact, Experts Agree That Bush Policies, Economic Downturn Are Largely To Blame For The Growing Deficit
CBO Projected $1.2T Deficit In January 2009 Based On Spending Bush Authorized; Actual Deficit Was $1.4T. In a January 7, 2009, report, the Congressional Budget Office (CBO) projected, based on spending authorized under the Bush administration, that the federal deficit in FY2009 would total $1.2 trillion. According to the CBO, the actual federal deficit for FY2009, which began during the Bush's last year in office, was $1.4 trillion. [CBO,
January 2009 and
January 2010]
CAP: "Single Most Important [Cause Of The Deficit] Is The Legacy Of President George W. Bush's Legislative Agenda." In an August 2009 analysis, the Center for American Progress (CAP) concluded that about two-thirds of the then-projected budget deterioration for 2009 and 2010 could be attributed to either Bush's policies or the economic downturn:
The report explained:
As for the deficit's cause, the single most important factor is the legacy of President George W. Bush's legislative agenda. Overall, changes in federal law during the Bush administration are responsible for 40 percent of the short-term fiscal problem. For example, we estimate that the tax cuts passed during the Bush presidency are reducing government revenue collections by $231 billion in 2009. Also, because of the additions to the federal debt due to Bush administration policies, the government will be paying $218 billion more in interest payments in 2009.
Had President Bush not cut taxes while simultaneously prosecuting two foreign wars and adopting other programs without paying for them, the current deficit would be only 4.7 percent of gross domestic product this year, instead of the eye-catching 11.2 percent--despite the weak economy and the costly efforts taken to restore it. In 2010, the deficit would be 3.2 percent instead of 9.6 percent.
The weak economy also plays a major role in the deficit picture. The failure of Bush economic policies--fiscal irresponsibility, regulatory indifference, fueling of an asset and credit bubble, a failure to focus on jobs and incomes, and inaction as the economy started slipping--contributed mightily to the nation's current economic situation. When the economy contracts, tax revenues decline and outlays increase for programs designed to keep people from falling deep into poverty (with the tax impact much larger than the spending impact). All told, the weak economy is responsible for 20 percent of the fiscal problems we face in 2009 and 2010.
President Obama's policies have also contributed to the federal deficit--but only 16 percent of the projected budget deterioration for 2009 and 2010 are attributable to those policies. The American Recovery and Reinvestment Act, designed to help bring the economy out of the recession is, by far, the largest single additional public spending under this administration. [CAP,
8/25/09]
CBPP: "[V]irtually The Entire Deficit Over The Next Ten Years" Due To Bush Policies, Economic Downturn." The Center on Budget and Policy Priorities (CBPP) published an analysis of federal deficits in December 2009, which was most recently updated on June 28, 2010, titled, "Critics Still Wrong on What's Driving Deficits in Coming Years: Economic Downturn, Financial Rescues, and Bush-Era Policies Drive the Numbers." The report noted:
Some critics continue to assert that President George W. Bush's policies bear little responsibility for the deficits the nation faces over the coming decade -- that, instead, the new policies of President Barack Obama and the 111th Congress are to blame. Most recently, a Heritage Foundation paper downplayed the role of Bush-era policies (for more on that paper, see p. 4). Nevertheless, the fact remains: Together with the economic downturn, the Bush tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years.
The report also graphed the effects of Bush's policies and the wars in Iraq and Afghanistan on the deficit. From the report:
[CBPP, updated
6/28/10, emphasis in original]
Harvard Business Review Group Director: "[T]he Giant Deficit Is Mainly The Result Of The Collapse In Tax Receipts Brought On By The Recession." In an October 2010 post on his Reuters blog, Justin Fox, editorial director of the Harvard Business Review Group, analyzed the deficit and concluded that it was "mainly the result of the collapse in tax receipts brought on by the recession":
The Treasury Department reported on Oct. 15 that the deficit in fiscal 2010, which ended Sept. 30, was $1.294 trillion. That's less than FY 2009's $1.416 trillion, but it's still really really big. Why is it so big, though? Is it because of all that stimulus and bailout spending? Or is something else going on?
To find out, I created a fantasy world. I figured out how fast federal spending and revenue grew over the last business cycle, from 2000 through 2007, and calculated where we'd be today if those growth rates had continued through 2010. I was originally motivated to do this for a commentary that's supposed to air tomorrow night on Nightly Business Report. But I'm thinking there's not a huge overlap between Felix Salmon readers and Nightly Business Report viewers, so I'll go ahead and share what I learned.
In my no-financial-crisis, no-bailout, no-recession, no-stimulus scenario, spending kept growing at 6.22% a year, and revenue kept growing at 3.45%. You can see from the difference between the two numbers that this was an unsustainable path. But it clearly could have been sustained for a few more years.
Where would it have left us in fiscal 2010? With $2.843 trillion in federal revenue and $3.270 trillion in spending, leaving a deficit of $427 billion. The actual revenue and spending totals for 2010 were $2.162 trillion and $3.456 trillion.
So spending was $186 billion higher than if we'd stuck to the trend, and revenue was $681 billion lower. In other words, the giant deficit is mainly the result of the collapse in tax receipts brought on by the recession, not the increase in spending. Nice to know, huh? [Justin Fox,
blogs.reuters.com,
10/25/10, emphasis added]
